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Shipping company wants $2.15 billion from Europe's antitrust regulator

By Natalia Drozdiak 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 27, 2018).

BRUSSELS -- United Parcel Service Inc. is suing the European Union's antitrust watchdog for EUR1.74 billion ($2.15 billion) plus interest over its veto of UPS's merger with Dutch parcel-delivery company TNT Express NV, a move that could prove fruitful at a time when the bloc's top courts increasingly scrutinize the competition cop's decisions.

Indeed, an EU court last year overturned the European Commission's rejection of the planned $7 billion acquisition of TNT in January 2013, citing procedural missteps.

Atlanta-based UPS is seeking compensation for the commission's decision, which the shipping company says prevented it from "materializing the benefits associated with that proposed transaction," according to court documents published Monday.

The commission will defend itself in court, an EU spokesman said. The regulator was already appealing the judgment against its veto of the TNT deal.

In the past, the EU's two top courts rarely annulled decisions by the antitrust regulator, which built a fearsome reputation over the past two decades through a series of high-profile cases against America's biggest companies, including General Electric Co., Microsoft Corp. and Alphabet Inc.'s Google. But recent court rulings have put the commission on the defensive.

In September, the EU's highest court backed Intel Corp.'s appeal of a EUR1.06 billion antitrust fine levied by the commission in 2009, referring the case back to a lower court.

The actions by the two Luxembourg-based EU courts are welcomed by companies and lawyers, who complain that checks and balances in the bloc's system are too weak. They cite the antitrust watchdog's autonomy and its power to act as the prosecutor, judge and jury in competition cases.

While companies can appeal decisions to the EU's top courts, judges there look for obvious legal errors rather than seeking to form a new opinion on cases and rarely overturn decisions made in Brussels. U.S. enforcers, by contrast, need to prove their cases before a judge from the outset.

"There is a feeling among the companies and competition practitioners that the courts have been rather lenient to the commission and therefore, it's either better to settle or to forget about appealing," said Assimakis Komninos, a Brussels-based partner at global law firm White & Case." "There have been a couple of cases, which shows a bit [of] movement on the side of the court, but look at where we are coming from."

Only a handful of merger vetoes have been overturned by the top courts, despite legal challenges being routine. In those rare instances, companies have typically sought compensation from the commission. In 2003, Schneider Electric SA sued for nearly EUR1.7 billion after its acquisition of French electrical equipment maker Legrand was blocked but later overturned. In the end, the commission was ordered to pay EUR50,000 in damages to Schneider.

After UPS called off its deal for TNT due to the commission's opposition, logistics rival FedEx Corp. stepped in, acquiring the business in 2016 for EUR4.4 billion. The deal expanded FedEx's reach in Europe, but the acquisition hasn't been trouble-free. Last summer, the TNT unit was hit with a cyberattack that crippled operations for months and required hundreds of millions of dollars in spending to fix.

The EU blocked the UPS-TNT deal on concerns the overnight-parcel-delivery market would effectively become a duopoly between a combined UPS-TNT business and DHL, a unit of Deutsche Post AG. The regulator also worried that other parcel-delivery companies, including FedEx, could be shut out of the market.

UPS continues to defend the deal.

"We feel strongly that the proposed acquisition would have constituted a good deal for logistics customers," said Gregg Svingen, a spokesman for UPS, said Monday. "The compensation being sought corresponds to what we believe, through objective assessments verified by expert third parties, to be the value of the opportunity wrongly prohibited by the European Commission."

--Paul Ziobro contributed to this article.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com

(END) Dow Jones Newswires

February 27, 2018 02:47 ET (07:47 GMT)

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